In small scale or medium scale organizations people working will be confined to limited number so peer -to – peer interaction and interaction with higher and lower level employees will be very frequent and common so no predefined structure is required as delegation of various tasks and decision making can be done with face to face communications. But in the organizations where we have larger work groups in order to make any decision or delegate tasks a well defined structure is required this is place where Organizational structure comes into picture, certain procedures will be established that assign responsibilities for various function and these decisions play a major role in determining organizational structure .
Based on the work done in organization the organizations structure will differ and
Below are the Factors determining the organizations structure:
A) Size of the organization
B) Employees’ responsibilities
D) The geographic dispersion of facilities (number of locations world wide where the organization has its services and facilities)
E) Range of its business (the degree to which it is diversified across markets)
Best organization structure will come up if all the above factors are taken into consideration. Responsibilities of employee are defined by what kind of work they do and who they are reporting to and for the manager’s it would be based on the employee’s who reports to him/her and defining these responsibilities will be specific to the positions in the organization rather than to specific individuals. The relationships among these positions are illustrated graphically in an organizational chart (see Figures 1a and 1b).
Organizations can have multiple structural variations based on various factors but irrespective of these variations there are few basic principles and small number of patterns which are common for most of the organizations. In the coming sections detailed explanation of the patterns used in organizational structure and historical context from which some of them were emerged is provided.
First section will give us a brief overview about the organizational structure in twentieth century. The second section provides additional details of traditional, vertically-arranged organizational structures. This is followed by descriptions of several alternate organizational structures including those arranged by product, function, and geographical or product markets. Next is a discussion of combination structures, or matrix organizations. The discussion concludes by addressing emerging and potential future organizational structures.
ORGANIZATIONAL STRUCTURE DURING THE TWENTIETH CENTURY
Every Organization will have its own organizational structure if we understand the historical contexts from which these organizational structures have developed it helps to explain why some structures are the way they are. For example, U.S.Steel and Bethlehem Steel which are old but still operating are using vertical hierarchies and Newer mills such as Chaparral Steel structured more horizontally (More capital on innovativeness of the employees , and there is a part of reason which we can understand why these organizations have variations by having profound knowledge on historical contexts . The part of reason is Organization structure will follow certain laws of physics and chemistry like inertia where if any object is in motion it tends to continue on that same path (Law of inertia) in the same way organization’s structure changes will be very infrequent because immensity of the projects and robustness in the managerial task would be partly responsible for the same.
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In early stages of twentieth century there was a drift in US Business sector, industry is migrating from job-shop manufacturing to mass production and scholars like Frederick Taylor in the United States and Henri Fayol in France analyzed the new systems and there emerged the new principles on how the organization structure would be to achieve greatest efficiency and productivity which is more like mechanical. Even before this German sociologist and engineer Max Weber came to conclusion that when societies embrace capitalism, bureaucracy is the inevitable result. Even though his writings were not translated into English until 1949, his work s has little impact on US Management practice until mid of 20th Century.
Management during 20th Century is influenced by Bureaucratic ideas of Weber which says that more power will be given to the position in the organizational structure not to the person holding the position. Taylor’s scientific management which emphasize on using scientifically-determined studies of time and motion for accomplishing the task and as per Taylor it is considered as one best way. Also Fayol’s ideas of invoking unity within the chain-of-command, authority, discipline, task specialization, and other aspects of organizational power and job separation and from here came the concept of vertical structured organizations main character of this structure is top-down approach and distinct job classifications which is also known as the traditional or classical organizational structure.
Traditional organizational structure:
Impact of traditional organizational structure on management practices
Every Organization will have a unique organizational structure. But the ultimate goal for every organization is to accomplish the work following this structure. In process of organization growth and changes happening in it the organizational structure will be emerged.
There are four basic decisions managers have to make in process of developing an organizational structure. Below is the detailed description on the decisions which are identified by researchers
Modularity: Work in the organization must be divided into modules. This would help to reduce the robustness of the task and effective deliverables
If the organization has small number of employees there is no need to dividing the people into groups but in the scenario where we have large organization we need to have small work groups which is popularly called as departmentalization
We should have predefined number of groups and employees (Which should have predefined structure like whom every employee is reporting to how many employees are under a specific manager.
Decision making power need to be distributed. There should be certain pool of employees who are performing narrow tasks and another pool of employees who are performing wide variety of tasks
Generally when an organization is growing the task will be more specialized so Manager must be more specific in deciding the groups and assigning the tasks and there will be few criteria which we need to take into consideration while forming the group’s most common thing which is taken into consideration is the function or domain. Eg: In an organization people who are specialized with account will be put under the accounts pool which in turn will form the accounts department size of groups also can range based on the requirements and the tasks and mostly in traditional organizational structures decision making power will be finally in hands of the highest authority but during 1950’s and 1960’s pressure was increased to involve employees also in decision making. Most of the scenarios vertical hierarchy is given priority in traditional structure in case of decision making.
Traditional model has the following features
At every level more importance will to given to specialization of the jobs
Departments will be more of functional specific
Controlling will be narrowed so as there is modularity at each level
Centralization of the power
Thus we can refer this structure as traditional , formal, mechanism or command , classical , bureaucratic and control and structure where the above criteria are not met decisions are made at opposite end of spectrum such structures are unstructured , informal or organic
Traditional way of organizational structure can be represented as a pyramid with the higher authorities like president at the top level and the vice president coming next and most of the employees at the bottom of the pyramid it is quite simple to represent the traditional organizational structure and most of the cases the departments are decided based on the functionality. Figure 1a and 1b illustrate such an organization structure grouped by functional areas of operation, marketing and finance.
Matrix Organizational Structure:
In some organizations their requirements would be different leading to scenario where we any of the organizational structure meet their requirement in such scenarios matrix organizational structure can be adopted in this structure it can be combination of functional departments and the product groups consider an example where a company is trying for next release of its product and for the entire product development life cycle experts are hired from different departments like accounting , engineering , production and marketing and the personnel’s hired from these department will be working for the specific project and they are responsible for two managers such as structure is referred as matrix organizational structure (Fig 3 shows the matrix structure )
This structure is the highly specialized staff will be hired to meet the requirements. In small scale organizations there will be duplication of the staff in the same department rather than following this approach we can hire the experts and they can share their time working in multiple projects functional departments will provide functional expertise and working with specialist will let every individual to grow their knowledge and cross fertilization of ideas .
Main disadvantage of this kind of structure is reporting to multiple manager like person need to report to both functional and product manager. Higher level management in the organization need to be cautious in delegating the power and predefine the roles of the managers else there is every possibility for power conflicts
Apart from product/function matrix other bases can also be mapped in large organizations. Say along with product the geography can also be tied up.
Product manager will be responsible for developing, manufacturing and distribution of products and geography manager will take care of success of the business in their region. Growth of business will be accompanied by growth of bureaucracy. When the changes are taking place in an organization bureaucracy may become hindrance rather than helping it as the sluggish bureaucratic way of thinking In order to overcome this we can start having new ways of thinking we can make the SBU’s (Small business units. Such unit could be a separate company and with full profit and capital will be managed by the head of the unit and he is responsible for the president of the organization. SBU’s can be based on the geography, functionality or product lines Figure 4 shows the SBU with geography area
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